Budgeting 101

Here’a basic one-page budget which I’ve been using for many years. Hopefully you will find it useful.

Lets take a quick overview of the one page budget.

Up at the top left is the date – this is the month you’re working on.

Column A is the list of all your expenses.
Like Gas, Electric etc.

Column B your balance from the previous month or your Beginning of Month(BOM)Balance.

Column C is the amount of money you think you need to set aside each month for each expense.

Column D is your actual payment for that expense.

Column E are any adjustments you might have to make to your figures.

Column F is your balance at the End of the Month or EOM.

Column G is for any notes you might want to make.

Toward the bottom you’ll see the word Cash – that’s how much money you have in your checking account.

And Finally the word BALANCE – this is how much you have extra after you’ve paid all your bills. It should be a positive number, not a negative number.

MONTH/YEAR

A

B

C

D

E

F

G

Balance – BOM

Budget

Expense

Adjust

Balance-EOM

Misc and Notes

Food

0.00

-400.00

400.00

0.00

Cable TV

0.00

-87.00

87.00

0.00

Car Insurance

-100.00

-50.00

-150.00

Car License

0.00

Car Repair

Electric

0.00

0.00

Laclede Gas

0.00

0.00

0.00

Medical

0.00

0.00

Food

0.00

Gas-car

0.00

Insurance

MISC.

0.00

0.00

0.00

Life Ins.

0.00

0.00

0.00

0.00

0.00

0.00

Per. Prop. Tax

Phone – cell

0.00

Real Estate Tax

Sewer

Trash..

Vacation

0.00

Water

Xmas

0.00

Adjustment

0.00

TOTAL

0.00

-2000.00

2000.00

-2000.00

TOTAL MISC…

0.00

Balance

Budget

Expenses

Cash

2000.00

BALANCE

0.00

Now before we get into the detail of the budget, there’s one thing you need to do.
Get out your calendar and write the word budget on each an every month.
I usually put it on the last day of the month.
That way when you look at your weekly activities, you’ll remind yourself to do the budget that month.

Note that it only takes me less than 15 minutes to do each month’s budget.
So it’s not a big deal once you set it up.
Now let’s go through this in a bit more detail.
First the date.
I usually do my budget at the end of the month.
I want to see how I did for the previous month.

Now in Column A you need to list all your expenses. These are expenses which you have to pay. They can be either due on a weekly, monthly or possibly due every six months like car insurance.

Things like food and your monthly cable bill are two good examples of bills that you will have to pay on a regular basis. Ideally, if you budget $400 for food every month and you spend $400 for food every month then your balance at the end of the month is zero. If you only spend $360 then you will have a positive surplus of $40. If you spend $500 for the month then you will have a negative balance of -$100.

Some bills don’t come on a monthly basis – things like life insurance and car insurance may come every 6 months or even once a year.
In my example above we are budgeting $50/month for car insurance. We start the beginning of the month with a balance of -$100, we add -$50 for the month and end the month with a -$150.00 balance.

You may also notice that I don’t have a place on the budget for Savings.
What I want you to do is have at least 5 to10% of your salaries taken out of your paycheck each month and put into a savings account. That way when you get your check you
don’t even think about that money. It’s set aside for an emergency. Most experts tell you to keep at least eight months set aside in a savings account. When you get that done then you can start investing for retirement. But that’s not what this program is about. Today we’re talking about making a adhering to a monthly budget.

I also don’t show taxes on this budget. Make sure you have enough taxes taken out of each monthly paycheck so you won’t owe any taxes at the end of the year.

Now for some of you, you may have no real idea what your expenses are.
For those people I’d recommend that you go back through your check book and credit card statements and figure out first where you’re spending your money.

If you have to, keep a notebook with you and write down every time you spend money, what it’s for and how much. Then you can use that to help figure out what your expenses are.

If you don’t have budget billing ( I encourage this to even out your monthly bills) you’ll have to find or estimate your gas and electric bills for a year and then divide by 12. Look for your old stubs, go through your checkbook, look at your old credit card statements however you pay for it.
If you don’t have some of the information, estimate it as best you can.

The same is true for every other expense category.
Find out or estimate how much you spend yearly in each category, divide by 12 and that’s your monthly budget amount.

Your non-monthly expenses like car and life insurance do the same.
Figure out how much you spend on a yearly basis and divide by 12.

It’s important to note that each entry in the Budget col. is a negative number.
If you plan on spending $300 per month on Groceries, then you need to enter
negative 300.00 in the Budget column.
Every item in the budget column is a negative number.

At the bottom of Col C -, you’ll notice an amount.
That’s how much money you plan on spending or setting aside every month.
That amount should be equal to or greater than your take home pay.

If you take home pay – after taxes- is $2000 per month and you budget is $2300 a month your in trouble.
You’re probably in debt and paying off a lot of credit cards and finance charges.

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Column D – are the payments you make every month.
When you pay with cash – that’s a payment
When you write a check – that’s a payment

If you use a debit card and the money comes directly out of your bank account – that’s a payment
If you pay bills online and the money comes out of your checking account – that’s a payment

Here’s where it gets a bit tricky.
If you buy something with a credit card, it’s not a payment until you actually pay for it.
If you buy a book in June with your MasterCard and pay for it in July, it’s a July expense.

So each month I have to go through my check book and credit card statements and see what bills I paid and they get listed in col C the Payment column.

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Column B is the Balance at the Beginning of the month.
BOM stand for Beginning of Month.
This number is usually either zero or a negative number.
This is the money you’re setting aside for each expense.
Each month you copy over the figure from Col F Bal EOM over to column D

Let me give you an example .
If you’re budgeting for a vacation
How about going to the Florida Keys in December.
That would be nice wouldn’t it.Wwe’re setting aside $200 a month.
By the endo of June how much money should we have set aside?
$1200. Your balance at the beginning of the month would be a negative $1200

Your Balance at the BOM is brought forward Col F – the Balance at the EOM
of the previous month.

So, one of the first things you do each month when you start a new budget, is you copy the EOM balance from the previous month onto the BOM of this month.

If your EOM balance for June is -1200, then you write in that amount in the BOM balance for your July budget.

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Column E is an adjustment column and usually doesn’t have any figure in it. Usually at the end of the year I use it to bring my figures into balance and adjust some of my figures.

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Col F is the Balance at the EOM or End of the Month.

COL F = COL B + C + D + E
Basically you just add up all of the figures to the left of Col F
and that’s the EOM balance

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Now some of you may be thinking
Come on Tom – pen and paper – calculators
I’m not very good at math – I’ll never be able to make all those calculations.

Well this is where a computer definitely helps out.

I’ve put this budget into an Excel spreadsheet.
It does all the calculations for you.
I’ve posted an excel budget you can start with below.

At the End of the Year – my final December budget
I’ll try to make adjustments if I was off in some of my calculations.

Now let me tell you quickly that initially it’s going to take some work on your part to set this budget up, but once you’ve made the initial entries it’s a breeze to go through.

It is a bit painful to start, but it’s worth it.
Let me close with this:

There’s a TV commercial a man in his mid-30s is counting his blessings: , a big house, a pool in the backyard, a new SUV. He even belongs to the local golf club.
“How do I do it?”, says the man rhetorically.
“I’m in debt up to my eyeballs.”, he responds.
Somebody please help me.

My friends a budget will help you to not only pull you out from financial ruin,
but it will keep you out of trouble in the first place.